Tuesday, December 6, 2011

RALLY FIZZLES OUT AFTER HOT RUMOR FROM EUROPE: Here's What You Need To Know, December 6, 2011

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Tuesday, December 6, 2011

RALLY FIZZLES OUT AFTER HOT RUMOR FROM EUROPE: Here's What You Need To Know

Sam Ro | Dec. 6, 2011, 4:00 PM | 1,406 | 3

The second day of Europe's hell week was relatively quiet until another rumor sparked markets during late trading.

First, the scoreboard:

Dow: +52.3 pts, +0.4%
S&P 500: +1.4 pts, +0.1%
NASDAQ: -6.2 pts, -0.2%

And now, the top stories:

The stage was set for today's market action after last night's S&P ratings actions. Specifically, S&P put 15 of 17 eurozone countries on negative credit ratings watch. This wasn't exactly much of a surprise to the markets given the financial strain in the region and interconnectedness of the individual countries.
However, the real concern is that an actual downgrade of a eurozone country would ultimately lead to a downgrade to the European Financial Stability Facility (EFSF). A downgrade would cause EFSF interest costs to rise, and therefore inhibit its ability to support the struggling sovereigns. While this is a troubling development, optimists see it as increasing pressure to EU leaders including the ECB to act swiftly and aggressively.
An afternoon rally was sparked by a Financial Times report. At around 2:45, the FT reported that EU leaders were considering doubling the size of the European Stability Mechanism, the permanent bailout fund intended to replace the EFSF. Markets spiked only temporarily.
There was no notable U.S. economic data released today. However, 3M, the multi-product conglomerate from Minnesota, announced it expected 2012 sales to grow 2% to 6% year-over-year in 2012, with EPS rising to $6.25 to $6.50. Shares rose 1.5%.
LinkedIn got upgraded to "overweight" from "neutral" by JP Morgan analyst Doug Anmuth, who cited strength in all three of the companies business segments.
Darden Restaurants was a big loser today after management lowered its full year sales and earnings guidance. The operator of Olive Garden and Red Lobster now expects 6% to 7% total sales growth driven by 2% to 3% same-restaurant sales growth. EPS is expected to climb 4% to 7%, down from previous guidance of 12% to 15% growth. Shares fell 12.4%.
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